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IBM spins off home networking division

IBM has spun off its former home networking solutions unit into an independent company called Home Director.

IBM has spun off its former home networking solutions unit into an independent company called Home Director.

The entity will be financed by investors Spencer Trask Intellectual Capital Company but IBM will retain an equity stake in the company. Financial details were not released.

Mary Walker, who previously headed IBM's home networking unit, was named president and chief executive officer of Home Director and about 55 employees from the unit's sales, marketing and engineering staff will join her.

Karuna Uppal, senior analyst with the Yankee Group, believes the split makes sense. "IBM is a huge company. The Home Director division was just a small part of it and was restricted by the confines of the large company in an industry where you need to be nimble."

Walker said the spin-off should help Home Director move more quickly. "This makes us much more powerful and lets us loose to try to run fast rather than to keep within the confines of IBM," she said.

Uppal said another reason for the move was that home networking does not fit well with IBM's other business. "The type of market that Home Director is aimed at is not really the same as IBM's core business, which is aimed at international businesses," she said.

Both IBM and Home Director will benefit from the separation, according to Uppal. "Home Director will be able to move faster and IBM will maintain a close relationship and an equity stake in the company. If it does well, IBM will benefit financially. IBM wants to look at the home networking market but more from the back end. This way, they'll be able to keep a pulse on the industry without being directly involved," she said.

Drawbacks should be minimal, she continued. "IBM has a lot of money and research and development [resources] which it will no longer be allocating to Home Director. That may be difficult at first but Home Director will have the people that developed the business," said Uppal.

She added that Home Director will miss IBM's marketing muscle and brand name, though the company will continue to use the IBM brand for a while. "IBM has a strong reputation. Some customers may be uncomfortable [after Home Director stops using the brand name] but I expect that number will be small," said Uppal.